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Why Real Estate Brokers Use Contingencies in the Real Estate Sale Agreement

by | Jan 11, 2016

A seller who accepts an offer with contingencies should help the buyer remove them as soon as possible

By Jeff Sorg, OnlineEd Blog

tear up contact(January 11, 2016) – When properly used, a contingency excuses a party to the contract from the obligation to complete the contract without causing a breach of the contract. Usually, a contingency provision is added into a contract because the information that is the subject of the contingency is nor available, or because a crucial event needs to occur before a party is willing to proceed with the contract. The contingency allows this party the necessary time to obtain the required information or for the event to occur before becoming obligated to perform the balance of the contract.

As a general rule of contract interpretation, unless otherwise stated in the contract, either the buyer or seller can claim benefit for a contingency, regardless of who drafted it and made it part of the contract. Unless specified in the agreement, one party cannot unilaterally waive the contingency, and both sides will need to waive it. When drafting a contingency, the real estate broker will include who (the buyer, the seller, or both the buyer and seller) has the right to waive, satisfy, or remove the contingency.

Because the buyer usually requires information regarding the condition of the property being purchased, along with time to qualify for financing, most contingencies are drafted into the contract for the buyer’s benefit. A contingency of this nature allows the buyer or a third party time to investigate matters of concern. For example, a properly drafted financing contingency allows the buyer to cancel the balance of the contract if the buyer or property don’t qualify for financing.

Few real estate sale agreements have contingencies inserted into them for the benefit of the seller. One example of a contingency benefiting a seller is the sale of the seller’s property being contingent upon the seller finding a suitable replacement property. In other words, the seller isn’t selling until the seller finds a new home.

Ideally, sellers prefer offers without any buyer contingencies. However, it is standard practice for most sale agreements to include some contingencies drafted specifically for the benefit of the buyer. To make sure the buyer commits to the performance of the entire contract, a seller who accepts an offer with contingencies should help the buyer waive or remove them as soon as possible, and the seller should allow minimal time for the buyer remove or waive the contingencies.


For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

 All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

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